LONDON — Experian announced plans to acquire UK credit checking startup ClearScore for £275 million ($383 million) on Thursday, the biggest British tech acquisition in years.
ClearScore, which offers people free credit checks, was only a little over three years old and was the product of London “venture builder” Blenheim Chalcot.
Dan Cobley, who heads up fintech at Blenheim Chalcot and co-founded ClearScore, said the big exit is a validation of the model, where investors provide practical support to help businesses rather than just funding as regular venture capitalists would.
“You look at [ClearScore] versus most other startups and I think that validates the pace of execution that comes when you’ve got the support that comes with a venture builder model,” Cobley, who used to be MD of Google in the UK, told Business Insider in an interview on Friday.
The Venture Builder model explained
Blenheim Chalcot’s modus operandi is to take all of the distracting hassle out of building a startup so that entrepreneurs can spend their time focusing on their ideas.
Cobley said: “Other entrepreneurs that are going through the more traditional route… [spend] about a third of their time worrying about fundraising, about a third of the time worrying about the admin of the business — whether that’s the rent or R&D tax credits or recruiting — and that leaves about a third of their time to build the amazing proposition that they’ve set their minds on.
“With the venture builder model what we try to do is change that equation to be about five, five, 90, so the founding team can actually move three times faster in building the thing that they’re actually focused on.”
Blenheim Chalcot has large office spaces in Hammersmith, West London, and Nottingham where many of its 17 businesses base themselves It also employs staff to help its startups with legal matters, recruiting, IT, and other admin-type tasks.
“If we can provide that centrally with high quality trusted resources that know how the entrepreneurial startups work, then they can provide a real accelerator to the business,” Cobley said.
He added: “There’s a weaning process so that by the time a company goes to exit it’s fully self-sufficient and it’s using Blenheim Chalcot more as a thought partner and a consulting resource.”
Blenheim Chalcot will either look to create businesses when it spots an opportunity, back entrepreneurs with good ideas, or, more rarely, acquire businesses with attractive assets that need a digital boost.
Cobley knew ClearScore’s CEO Justin Basini from the days when they both worked together at Capital One and the pair got together, along with investor and Capital One cofounder Nigel Morris, to cofounder ClearScore in mid-2014.
The speed at which ClearScore scaled — it only launched its product in mid-2015 but already has 6 million customers in the UK — shows what a difference this hands-on support can make, Cobley said.
‘The billion dollar aspiration is a mark of vanity’
Blenheim Chalcot has been going since the late 1990s and ClearScore is its 16th successful exit and its biggest. The firm was started by entrepreneurs Manoj Badale and Charles Mindenhall, who have bootstrapped the venture builder since inception.
“The majority of the money that we put into the businesses is partners’ own money — family office-type money versus LP money,” Cobley said.
All the funds from past sales are reinvested into new businesses but Blenheim isn’t under pressure to sell.
“We’ve got some businesses — Agilisys, 15 years and still going strong — and then we’ve got some like ClearScore that have exited very quickly,” Cobley said. “It’s really just a question of when they’re ready and when there’s an exit opportunity that looks really positive for us and the management team.”
Funding Circle cofounder Andrew Mullinger lamented ClearScore’s relatively quick sale on Twitter when the deal became public. “Feels like lots more value could have been created!” he said, saying he felt “a little sad.”
Cobley countered: “Maybe we could have carried on independently for longer but I think the billion dollar aspiration is as much a mark of vanity as anything you necessarily should aspire to. ”
The sale is “an opportunity to put together Experian’s data assets and distribution with ClearScore’s ability to build great consumer products,” he said. “It’s a good time for that to come together, for us to realise some value, and take it forward.”
‘We don’t have a model which looks to rapidly cull the portfolio’
Venture builders are relatively rare in Europe and the most famous is Germany’s Rocket Internet. Cobley wants more startups and investors to think about the venture builder model, arguing that it creates a better outcome for entrepreneurs.
“Our model is [that] once we’ve backed a business, obviously we’re very nimble and open to pivots, but we don’t have a model which looks to rapidly cull a large chunk of the portfolio,” he said. “It makes it much more attractive for seasoned professionals who are entrepreneurial but not your classical extreme risk entrepreneurs to come and work with us.”
The ClearScore deal is subject to approval from the UK’s Competition and Markets Authority and the Financial Conduct Authority. But Cobley already has one eye on the future.
“We’re very excited about SalaryFinance,” he said, referencing the startup that lends money against people’s salaries. “That’s growing really fast and we’re looking to take that into the US this year. We’ve got a new business launching publicly very soon called Dynamo Mortgage. We’ve got a business called Modular, a payments business.
“Within the group we’ve got some exciting businesses in EdTech — Hive Learning is growing really fast. And then we’ve always got our eyes open for new ideas. We’re interested in principle in InsurTech, Health Tech, those are a couple areas we haven’t launched anything in yet but are open-minded.”
By Oscar Williams-Grut 17 Mar 2018 (http://www.businessinsider.com)